Somebody is getting paid on your funding deal, and it is worth knowing exactly who, exactly how, and exactly what that does to the offer in your hand. Most merchants never ask. Most brokers are delighted not to be asked. This article is a broker answering the question anyway, with worked numbers, because the compensation structure of this industry explains almost everything about how it behaves.
None of what follows requires you to trust us. Every mechanism described here is something you can test on your own deal by asking the questions at the bottom of the page, of any broker, including this one.
The short version: the funder usually pays, and the price flexes
In the typical arrangement, a broker is paid by the funder when a deal closes, as a commission calculated on the amount funded. On its face that sounds comfortable for you: the funder pays, you do not. The catch is where the commission comes from. Funders do not run charities for brokers. The commission is built into the price of your deal, and in the most common structure, the broker has a hand on the very dial that sets your cost.
That dial is the difference between two numbers you have probably never heard spoken aloud: the buy rate and the sell rate.
Buy rates and sell rates: where the spread lives
When a funder underwrites your file, it prices the risk and gives the broker a buy rate: the factor rate at which the funder is willing to do the deal. Suppose the funder prices your file at a 1.25 buy rate on a $50,000 advance. At that rate you would pay back $62,500.
The broker then presents you a rate, the sell rate, which is allowed to sit above the buy rate up to some cap the funder sets. If the broker presents your deal at 1.35, you pay back $67,500. The $5,000 difference between $62,500 and $67,500 did not go to the funder and did not reflect your risk. It is the spread, and in this structure it is broker compensation, priced into your payback.
Sit with what that means: under a spread arrangement, the broker's income on your deal is set by how much above your true price you end up agreeing to pay. Your factor rate is partly a measure of your risk and partly a measure of how the conversation went. Two identical businesses, same file, same funder, can pay meaningfully different amounts because one of them pushed back and one did not.
Points on the funded amount
The other common structure is commission in points, where a point is one percent of the funded amount. A commission of four points on a $50,000 deal is $2,000, paid by the funder to the broker at funding. Some funders pay a flat commission schedule; others combine a base commission with a share of any spread above the buy rate.
Points create a quieter incentive than spreads, but they are not free of them. Commission scales with deal size, so a broker paid in points earns more when you borrow more, whether or not you need more. It also arrives only when a deal closes, so a broker paid in points earns nothing by telling you to wait, to fix your file first, or to take the cheaper product he cannot arrange. Keep that in mind whenever any broker, again including us, tells you a bigger or faster deal is the right move: the advice may still be correct, but it is never disinterested.
Renewals: the quiet second harvest
Advances are built to be renewed. Around the halfway point of a deal, someone calls to offer you "more capital" since you have "paid down so well." A renewal is a new advance, with a new factor rate applied to a new balance, and a new commission on the whole of it. For the broker and the funder, a renewal is a second harvest from the same field with no new marketing cost.
Renewals are not automatically bad for you; sometimes a renewal genuinely fits the business. But you should know that the renewal call is the single most profitable phone call in this industry, and evaluate it exactly as skeptically as you evaluated the original offer. Watch in particular for renewals that fold your remaining balance into the new advance and charge the new factor on all of it, so you pay a factor rate twice on money you already paid a factor rate on once. Before accepting any renewal, reread what happens when payments stop fitting and run the new deal through the MCA calculator as if it were brand new, because it is.
Fees charged on your side of the table
Beyond funder-paid commission, some brokers also charge the merchant directly: a broker fee, a consulting fee, a professional service fee deducted at funding. You should know two things about merchant-side fees. First, they stack on top of whatever the broker already earns from the funder, so ask about both, not either. Second, a fee that surfaces for the first time on your funding day, as a deduction you were never told about, is not a fee. It is a test of whether you read wire confirmations, and it belongs on the list of fees nobody explains.
A disclosed, agreed, written fee for real work is a legitimate way for a broker to be paid. The word doing the work in that sentence is disclosed.
Why this structure explains the industry you have experienced
Once you see the compensation mechanics, the industry's behavior stops being mysterious. The forty phone calls after you fill out one form: files are valuable and commissions are worth chasing. The pressure to sign today: commissions pay on closed deals, not careful ones. The push toward the maximum approval amount rather than the amount you asked for: compensation scales with size. The silence about cheaper products: a broker earns nothing on the bank loan he refers you to. Even backdooring, the practice of shopping your file without your consent, is just commission-chasing with your paperwork.
None of this means every broker is dishonest. It means the defaults of the structure reward speed, size and spread, and any broker behaving differently is doing so on purpose, against the grain of their own incentives. Your job is to find out which kind you are talking to, and there is a reliable way to do that: ask direct questions about money and watch what happens.
How we get paid
Here is our own answer to the question this article tells you to ask. ClickFundBiz is compensated in connection with financing we arrange, in most cases by the funding provider, calculated on the amount funded. Because compensation can vary by provider and by product, what we earn can differ between options presented to you, and you should weigh our involvement knowing that. If any fee were ever payable by you to us, it would be disclosed to you in writing before you owed it.
We are not claiming sainthood; the incentives described in this article apply to us too. We are claiming that you should never have to reverse-engineer how the person arranging your money gets paid, and that a broker who volunteers the answer is giving you evidence, not marketing. Judge us, and everyone else, on the answers to the questions below.
What to ask any broker, including us
Ask these before you sign anything, and get the answers in writing where they matter. A good broker answers all of them without flinching. Evasion on any one of them is itself the answer.
- Who pays you on this deal: the funder, me, or both? Both is common; undisclosed both is the problem.
- Is your compensation affected by the factor rate I end up with? This is the spread question. If the answer is yes, the rate is negotiable by definition.
- What is the total you will earn if this deal closes as presented? A dollar figure, not a shrug.
- Are there any fees on my side, now or at funding? Ask for every deduction between the advance amount and what hits your bank, in writing.
- Will you show me every offer you received on my file, not just the one you recommend? The pattern of what was hidden tells you as much as what was shown.
- Where will my file be sent, by name? This one protects you from backdooring, and any hesitation is a red flag.
Frequently asked questions
Do MCA brokers charge the merchant directly?
Some do, some do not. The common structure is funder-paid commission, but merchant-side broker fees, consulting fees or processing fees exist and can stack on top of funder-paid compensation. Ask about both sides explicitly, and treat any fee that first appears as a deduction on funding day as a serious warning sign.
Is using a broker more expensive than going direct to a funder?
Not automatically. A funder dealing with you directly does not necessarily pass you the commission it saved, and a good broker can produce competing offers you could not reach on your own, which often matters more than any single fee. The honest comparison is the total cost of the best deal each path actually produces. We work through this in broker versus direct funder.
What is a reasonable commission for an MCA broker?
There is no single honest number, because commissions vary by funder, product and deal, and we would be inventing a market statistic to give you one. The workable standard is different: the commission should be disclosed when you ask, it should not be hiding inside an inflated factor rate you were told was fixed, and the total cost of the deal should survive comparison against competing offers.
Can I ask a broker for the buy rate on my deal?
You can always ask, and the reaction is informative even when the answer is no. Some funders restrict brokers from sharing buy rates, but a broker can still tell you whether their compensation rises with your factor rate, which is the fact that matters. A broker who treats the question itself as offensive has told you how the spread is being used.